Herman Miller's third quarter impossible to call, executives say

ZEELAND -- Although Herman Miller Inc. executives decided not to try another quarterly forecast Thursday, they did give indications how sluggish their industry is in the economic downturn.

In a conference call with analysts, Brian Walker, chief executive officer, said the third quarter is traditionally tough to call. This year, it is nearly impossible.

"Our decision to not provide guidance at this time has two factors," he said. "The third quarter each year is hardest by far to predict," complicated by holidays and planned shutdowns. Then, throw in the turbulent economy.

"The fluid and rather cloudy economic environment will exacerbate our normal seasonal guidance," he said.

Two facets are telling, said Curt Pullen, chief financial officer.

"Our best two internal indicators of volumes are order rates and backlogs. Order rates are down 22 percent ... and backlogs are also down 19 percent."

The downturn pushed Herman Miller to make swift cuts in its work force in November. Through voluntary buyouts, layoffs and eliminating temporary jobs, the company expected to cut up to 600 workers worldwide.

Company officials were surprised by the response.

"We received more volunteers than we had anticipated," Walker said. The total by early next month will top 1,000.

While customers are discussing upcoming orders, many projects are getting delayed.

"All businesses are holding on to cash, and all their bankers are telling them to do that," Walker said.

Herman Miller's tough second quarter ended Nov. 29, with profits down 20 percent to $32 million and sales off 6 percent to $476.6 million. Earnings per share was 60 cents.

In early November, the company lowered its forecast for the quarter, setting a new range of $475 million to $495 million in sales, and earnings per share between 57 and 64 cents.

Across the U.S. office furniture industry, 2009 is not expected to be a lot better, with production expected to drop by 12 percent nationwide. Steelcase Inc., based in Grand Rapids, reports its quarterly results Monday.

All three major office furniture companies in West Michigan cut jobs this fall as the economy dropped.

Walker pointed to some bright spots for Herman Miller in its first two quarters.

The new storage furniture design, Teneo, was unveiled in June, and the Embody chair came on the market in October.

The health care sector, with the Brandrud brand, is doing well, and this fall, two styles of Herman Miller chairs are being sold by Costco, he said.

"The recent uncertainty in the global markets for the next several months will challenge all of our stakeholders," he said. "We are committed and confident that we have the right mix."

In trading on the Nasdaq on Thursday, Herman Miller shares closed at $14.02, down 21 cents (1.48 percent).